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Insurance Glossary

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Balance As Per Contra
There could be certain transactions wherein the insurance companies invest the funds and create investments on behalf of a particular fund and hence the assets cannot be treated as the assets of the insurance company. Such investments are shown on the assets side along with the wordings as per contra which means similar balance will appear in the liabilities side which represents the fund for the balances for which the investments are made. eg. investments made in respect of Environment Relief Fund.

Balance Sheet
Accounting statement showing the financial condition of a company at a particular date. Listed on the statement are the company's assets and liabilities and capital and surplus. Balance sheet is a snapshot of the values of assets and liabilities of the Company on a particular date. Drawing a balance sheet, as per the format prescribed under the IRDA Regulations, as on the last date of the financial year, is mandatory. However, such balance sheet can be prepared on any day. The balance sheet lists out the value of all assets to the company as against the various liabilities to the company and both the values should be equal on any particular day.

Balance Sheet Reserves
Amount expressed as a liability on the insurance company's balance sheet for benefits owed to policyholders. These reserves must be maintained according to the provisions of the insurance act, Regulations of the Insurance Regulatory and Development Authority and also as per the actuarial formulas. These reserves serve to guarantee that all benefit payments for which the insurance company has received premiums will be made.

Balances- Agents
As the business of insurance is mostly procured through the Agents all the premium transactions are accounted agent wise to arrive at dues from/dues to agents at the end of the year. As the number of transactions will be more, they are maintained separately for premium transactions and commission transactions. All the debit balances at the end of the year are added and shown in the assets side and the credit balance on the liability side of the balance sheet.

Balances- Aging Of
The account balance of any account will comprise of accounting entries over the entire period and finally at the end of the year, the balances may arise either out of last few transactions or out of the first few transactions. Hence, it is necessary to identify as to how long these transactions are outstanding in the books of accounts. For instance, a debtors balance can arise out of the last few months balances or out of first few months balances. In the latter case, it may look that they are outstanding for almost a year. Hence, steps should be taken for recovery. Such meaningful analysis can be done only when the year end balances are classified according to the age of the transaction.

Balances- Coinsurance
There are certain risks, which are shared between the direct insurers at the instance of the insured. These are of coinsurance transactions. Here the lead Insurer collects the 100% of the premium and in turn pass on the respective share of the premium to the co-insurance Companies. In the case of claims also, the lead insurer pays 100% of the claim and collects the co-insurers share of claim later. Such transactions are routed through the co-insurance companys account codes and the balances in these accounts are reflected in the assets side or liability side of the balance sheet, depending on the nature of balance.

Balances- Confirmed
The balances in the account of the insurance company may arise out of the transactions with outside parties who have to confirm their balances so as to certify the correctness of the accounts. For instance, a Bank A/c. shown with balance as per the account has to be confirmed by the banker. Similarly, an amount shown as due from outsider has to be confirmed as due from outsider. Confirmed balances add to the correctness of the balance.

Balances- Inter Branch/ Office
If the insurance company has large number of Branches for its operations, there could be many transactions between the Head Office of the Company and its Branches and also between the Branches. The balances in these Branch Accounts are grouped under Inter Branch Account Balances and shown in the balance sheet.

Balances- Reconciled
Various account balances at the end of the year are made up of different accounting entries and each entry in each account should be reconciled with the corresponding entry in which case, every item in the account balance at the end of the year can be explained. When such a detailed analysis of the transactions is done, the balances are said to be reconciled. Otherwise they are treated as reconciled balance.

Balances-Reinsurance Company
The direct insurer will be having transactions with the reinsurance companies either on treaty basis or facultative basis, which will involve premium cessions as well as claim recoveries. This will also have reinsurance commission transactions. All the balances in the reinsurance accounts are grouped under the reinsurance company balances and shown on the assets side or liability side of the balance sheet, depending on the nature of balance.

B/L
Bill of Lading. A bill of lading is a receipt signed on behalf of the ocean carrier, indicating in what apparent order and condition the goods have been received on board. It is not necessarily the complete contract of carriage of goods but is usually the best evidence of the contract. It is also a document of title and thus a document of transfer.

Back Office
Immediate controlling office, which does not directly transact business, but monitors and controls the marketing offices. Its main functions include looking to accounting records, ensure compliance by the marketing offices of the government regulations, company directives, guidelines etc. and also hold communication with marketing offices on all matters concerning the requirements of both sides.

Backlog
In insurance, extent of unattended proposals, enquiries or other references, un-issued policies/documents and indisposed claims preferred on policies.

Back-Up XL Covers
Sometimes it is possible that XL Cover expires before its natural expiry date due to one reinstatement provision exhausting the cover limits by two total losses. Back-Up XL Covers are arranged as additional reinstatement covers for the remaining period.

Bad Debts
A debt which is impossible to be collected and consequently has become worthless to the creditor.

Baggage insurance
Insurance Policy providing cover against loss of or damage to accompanied personal baggage of the insured or insured's family member(s)due to fire, theft or any accident during the course of journey including stoppage enroute, anywhere in India. The policy normally excludes routine travels like going to and returning from office, theft from unattended vehicle, articles worn on the body of the person, war etc. It is possible that the policy is modified to suit the exact needs of the proposer subject to mutual consent and the insurer following the procedure of "file and use" laid down by the Regulatory Authority.

Bagged Cargo warranty
Marine Cargo insurance policies normally exclude loss of contents from bags through seams and also natural loss in weight of cargo. In order that this issue is successfully addressed the insurers put a warranty in the policy to the effect that Shortage in damaged bags will be reckoned by a comparison of the weight of similar number of bags of the same lot arriving sound at destination and Policy will exclude shortage from sound bags

Bailee
A person who has legal possession of goods belonging to others and is supposed to take such care of goods as the owner would take. He has the insurable interest in such goods and can insure the same in his name.

Bailment
Contract concerning transfer of property from bailor to a bailee.

Bailor
The person who transfers his property to the temporary care, control and custody of another, while retaining the ownership with him.

Ballast
Material carried in vessel to ensure stability when the vessel is without any cargo.

Bank balance as per books and as per bank
As the company is entering all its bank transactions in its bank account in the ledger, the bank will also be maintaining a ledger account to record all the transactions pertaining to the company which will be reflected in the pass book and will also show the balance as per bank at any point of time. So the bank account will show balance as per the companys accounts and also as per the books of the bank.

Bank charges
The banker levies certain charges for some operations in the bank account like realizing outstation cheques, for effecting a bank to bank transfer, for returning the dishonored cheques etc. Such levies are accounted as bank charges in the books of account of the company by passing journal entries.

Bank Guarantee
In relation to Insurance, guarantee executed by a bank in favour of an insurer, guaranteeing payment of premium by the insured in relation to certain policy/policies, within the period stipulated in the guarantee. In India as per the provisions of the Insurance Act and the Rules thereunder Premium shall be physically paid to the insurer in almost all cases on or before the commencement of cover. The Act and the Rules provide that only in cases where the premium is not ascertainable at the time of commencement of cover a bank guarantee shall be accepted by the insurer.

Bank Reconciliation
Normally the bank account as per the books of the company and as per the bank should show the same balance. But there could be cases where cheques are deposited by the company, for which the company has increased its bank account balance but the same are not yet cleared in the clearing and hence the bank will show a lesser balance. Therefore the company has to prepare a statement showing how the balance between the companys accounts and as per the bank differs and what are the reasons for the same. Such a statement reconciling the bank balance as per companys books with that of the bank, is called Bank Reconciliation Statement.

Bank Transfers
When funds are transferred from one bank account to another the same has to be recorded in the books of account. This is done by way of bank transfer journal entry.

Bankers Indemnity Policy
A specially designed insurance policy for the banks. Main Coverage is against Loss/destruction of money and/or securities because of fire, riot and strike terrorism, burglary, whether in the premises or outside, caused by either employees or other persons Money and/or securities, whilst in transit, lost, stolen, misappropriated or made away with, either due to negligence, or fraud of the employees of others Forgery or alteration committed by employees and outsiders, resulting in financial loss to the bank Loss of money or goods held in trust by reason of dishonesty or criminal act of the employees

Bar Chart
A form of graphical presentation of data to highlight the main features of a frequency distribution of different kinds of risks and their consequences

Bareboat Charter
Form of Time Charter where the charterer hires the vessel and meets all expenses incurred during the period of the charter.

Barges
Smaller size Vessels for carriage of cargo from port to port-most of them used for carrying bulk cargo-some used for carriage from shore to ship. They are either dumb or power driven. They have the risk of capsizing during inclement weather

Barratry
Wrongful act willfully committed by the master or crew to the prejudice of the owner or the charterer of the vessel. Deliberate running aground, setting on fire and scuttling of the ship by the crew are instances of barratry. Loss or damage arising from barratry of the ship is covered under ITC-Hulls and ICC (A) Clauses.

Base Premium
Premium charged by the direct insurer on the policy

Basic Commission
The commission on a reinsurance proportional treaty which is always applied on the written premium of the treaty.

Basic Premium
The Gross Premium charged by the insurer to the insured under a policy.

Basic Rate
The rate of premium shown in the Rate Guide or Manual of the Insurance Company for a specific insurance cover.

Basis of Loss Settlement
A separate section inserted in all the policies spelling out the basis of settlement of different types of claims under the policy.

Basis of Valuation Clause
1.Provision describing the method of calculating the value of cargo for the purpose of declaration under marine cargo insurance open covers and open policies.

2.Provision appearing in the conditions relating to the fire declaration policies for stocks, dealing with the valuation of stocks for periodical declaration purposes.
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